Group 1 Automotive Inc., the fourth-largest U.S. dealership group, today posted net income of $8.4 million in the first quarter and said it will cut about $120 million from its 2009 operating costs.
The net income, posted despite U.S. light-vehicle sales at more than quarter-century lows, includes a $6.3 million loss for changes in how it accounts for debt. The results also include a $500,000 after-tax loss for the sale of a Ford store in Kendall, Fla.
Net income fell from $17.2 million in the first quarter of 2008, but improved from a net loss last quarter of $44.5 million after a $67.2 million charge for writing down the market value of dealerships and other assets. For full-year 2008, Group 1 posted a net loss of $31.5 million, compared with a $67.9 million profit a year earlier.
First-quarter revenue declined 32.2 percent from the year-previous quarter to $1.02 billion.
But the dealership group, of Houston, said today it is on track to cut more than $120 million in operating costs from its 2009 budget, exceeding its $100 million cost-cutting goal for 2009. These cost projections assume an annual sales rate of 10 million vehicles, down from 16.2 million in 2007 and 13.2 million in 2008. Last months sales rate reached 9.3 million units, up from 9.1 million in February but below the 14.8 million rate a year earlier.
We responded to the drastic drop of more than 35 percent in new vehicle sales with a series of aggressive and painful cost cuts, CEO Earl Hesterberg said in a statement. Our actions to strengthen our balance sheet by reducing debt and inventory levels are also critical as they provide added flexibility in the coming months.
Group 1 decreased its new-vehicle inventory by $209 million from the end of 2008, beating its target by almost $60 million, Hesterberg said. The 99-store company had 23,000 new vehicles in inventory at the end of December, more than a 90-day supply of inventory. Hesterberg told Automotive News last month he hoped to decrease that by at least 5,000 vehicles by the end of March.
Group 1 ended March with $182 million in liquidity. The company also repurchased $30 million of debt and repaid $10 million of mortgage debt, CFO John Rickel said in a statement.
Last week, AutoNation Inc., the largest U.S. dealership group, posted first-quarter net income of $34.6 million. AutoNation also posted a profit in the fourth quarter of 2008. Among the six other publicly traded dealership groups, only CarMax Inc. posted a fourth-quarter profit.